Data anomalies and Fed’s influence over volatility

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Data anomalies and volatility recedes but still high in some markets

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

Data Anomalies

  • Loss of millions of jobs distorts index of hourly wages.
  • Index jumped to 8% inflation rate from 3% earlier in 2020.
  • Savings rate soared from 8% to 33% during pandemic shutdown.
  • Will savings rate remain high as economy gradually reopens?
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Where Fed Has and Hasn’t Contained Volatility

  • Implied volatility in 2Y, 5Y, 10Y US government bond options recede.
  • Fed monetary easing behind the decline to pre-pandemic levels.
  • Implied volatility in 30Y bond options, equity indices, gold are relatively high.
  • Are credits spreads pointing to a feeble economic recovery?
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